Dole CEO, Ex-President Must Pay $148 Million Over Buyout

Jef Feeley

August 27, 2015, 10:46 AM EDTUpdated on August 27, 2015, 1:15 PM EDT

Dole Food Co. Chief Executive Officer David Murdock and a former executive of the fresh-fruit producer were ordered to pay $148.1 million over allegations they drove down the value of the company so Murdock could take it private on the cheap in a $1.2 billion deal.

Murdock received an “improper personal benefit” from the deal, in which he paid $13.50 a share to regain control of one of the world’s largest sellers of fresh fruit and vegetables, Delaware Chancery Court Judge Travis Laster ruled Thursday. The judge also found Michael Carter, Dole’s ex-president and chief counsel, should be held personally liable for investors losses on the buyout.

The two executives’ actions “deprived shareholders of the ability to consider the merger on a fully informed basis,” the judge ruled. Laster also cleared officials at Deutsche Bank AG, who advised Murdock on the deal, of wrongdoing in connection with the buyout.

Morgan Evans, a Dole spokeswoman, said Thursday that the company didn’t have any comment on Laster’s ruling.

Billionaires Index

Murdock has a net worth of $2.9 billion, according to the Bloomberg Billionaires Index. The billionaire announced last year he would donate $15 million annually to a North Carolina-based research facility he founded that focuses on nutritional health.

Murdock, Dole’s CEO from 1985 to 2007, returned to the role in 2013. He took the company private once before, in 2003, and then sold 60 percent to the public in 2009.

The 91-year-old Murdock, who has vowed to live to 125, testified in February at trial that unhappy investors were unfairly painting him “as a skunk” and that he didn’t engineer the deal to enrich himself.

“Dole stockholders are pleased with the judge’s decision to rein in what a controlling shareholder like Mr. Murdock can do in a management-led buyout,” Stuart Grant, an attorney for investors who sued over the deal, said in an interview.

Shareholders accused Murdock of conspiring with Carter and Deutsche bankers to drive down the value of the food company so he could buy the 60 percent of Dole he didn’t already own. That would allow him to take the company private for the second time in his career.

Disinformation Campaign

While Laster cleared Deutsche officials of acting improperly as part of the deal, he found Murdock and Carter engaged in disinformation campaign to convince directors that Dole wasn’t worth more.

Murdock didn’t disclose to directors that he’d talked to Deutsche bankers for more than a year about a management-led buyout before he made an offer, the judge noted.

Prior to Murdock’s bid, Carter canceled a stock buy-back program, which hurt the value of Dole shares, Laster said. The executive, whom the judge described as Murdock’s “right-hand man,” also provided low-ball projections to directors about the company’s value.

“Carter engaged in fraud” through his efforts to help Murdock take Dole private as cheaply as possible, Laster said. He added that the billionaire violated legal duties to shareholders by “orchestrating an unfair, self-interested transaction.”